The Bank of England warns of a big rate hike

epa10236284 People walk past the Bank of England in London, Britain, October 11, 2022. The Bank of England said it would expand its purchases of British government bonds to prevent'a material risk to Britain's financial stability', in third Emergency aid since Chancellor Kwasi Kwarteng's mini-budget announcement. EPO/TOLGA AKMEN

It comes as Andrew Bailey says he spoke to new Chancellor Jeremy Hunt and had an “immediate meeting” (Image: EPA)

Interest rates could be raised higher than originally expected to fight inflation, it has warned.

Britain’s economic shakeup continues to make global headlines – after the pound faltered again against yesterday’s recent mini-budget chaos.

In Washington, Bank of England Governor Andrew Bailey said officials would “not hesitate” to raise interest rates if necessary to fight inflation.

He added that a “stronger” response than previously anticipated may be required.

New figures showed more than five million households could increase their annual mortgage payments by an average of £5,100 over the next two years.

Mr Bailey’s comments have gained traction in recent weeks after the government’s mini-budget spooked markets, sending the pound plummeting and forcing the independent Bank of England to step in to restore financial stability.

The political and economic chaos unleashed by then-Chancellor Kwasi Kwarteng’s tax-cut budget finally culminated in his sacking on Friday by Prime Minister Liz Truss, who continues to struggle to restore her government’s fiscal credibility.

Kwasi Kwarteng and Andrew Bailey (Governor of the Bank of England).

Kwasi Kwarteng and Andrew Bailey ahead of Friday’s release in Washington (Image: Simon Walker/HM Treasury)

In his brief speech today, Mr Bailey acknowledged what he called the “violent moves” in UK markets when he signaled interest rates could rise again.

He confirmed that he had spoken to the newly installed Chancellor of the Exchequer about Britain’s economic situation.

Mr. Bailey had a meeting of minds with Jeremy Hunt on the subject of fiscal sustainability.

In response to questions in Washington, he said: “I can tell you that yesterday I spoke to Jeremy Hunt, the new Chancellor.

“I can tell you that there was a very clear and immediate disagreement between us about the importance of fiscal sustainability and the importance of taking action to that end.”

He continued: “It is not appropriate for me to qualify the decisions he makes, but the very clear message I would give is a clear message for everyone, including a clear message for the markets.

“I can tell you that there is a very clear and immediate disagreement about the importance of stability and sustainability.”

As winter approaches and fears of inflation and the cost of living crisis continue to mount, calls for government intervention have continued.

LONDON, ENGLAND - OCTOBER 14: The new British Chancellor Jeremy Hunt leaves 10 Downing Street on October 14, 2022 in London, England. Former Health and Foreign Secretary Jeremy Hunt is appointed Chancellor of the Exchequer by Prime Minister Liz Truss after she ousts Kwasi Kwarteng. (Photo by Leon Neal/Getty Images)

Britain’s new Chancellor Jeremy Hunt leaves 10 Downing Street (Image: Leon Neal/Getty Images)

It was revealed today that more than five million households could increase their annual mortgage payments by an average of £5,100 over the next two years, according to a leading think tank.

Overall, mortgage payments are set to increase by £26 billion a year by the end of 2024, the Resolution Foundation has warned.

Affected households in London will see the largest increase, with average payments expected to rise by £8,000 over the period – more than double the £3,400 increase experienced by affected households in Wales.

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Justin Scacco

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